Bermine's operations at Kwakwani grind to a halt
Community severely affected
Stabroek News
May 12, 2002
The bauxite operations at Bermine's Kwakwani are at a standstill as a result of the contractors there having withdrawn their services and equipment on Tuesday and because of a number of casual workers having been laid off. Also the fuel available can only run emergency services for a few hours and this has severely affected the community's water supply and has placed the continued functioning of the hospital in question.
Region Ten chairman, Mortimer Mingo, in whose region the community is located, visited Kwakwani last week where he met with Neighbourhood Democratic Council Chairman Edward Mendoza, and the Operations Manager at Bermine's Kwak-wani operations, Aubrey Bender.
Mingo confirmed that:
- all mining operations had ceased as result of Bermine contractors, to whom the Kwakwani mining operations were contracted, having withdrawn their services and equipment from Kwakwani as of Tuesday May 7, 2002.
- all casual employees had been laid off and the remaining work force, estimated at approximately 214 workers, was likely to be terminated shortly;
- Bermine pensioners had not been paid their pensions for the past three months and there was no indication from any source as to when and how they would be paid;
- the supply of fuel available at Kwakwani could only run its emergency services for a few hours. Consequently, the Kwakwani community had been virtually without electricity for the past four days;
- the water supply and the hospital had been severely affected and it was uncertain as to whether they could continue to function;
- the entire Kwakwani community was deeply disturbed over the lack of information from an official source or the Government.
Mingo said that no government official, including Prime Minister Sam Hinds, who had ministerial responsibility for bauxite, had informed him of the situation at Kwakwani.
Union officials have told Stabroek News that the situation is no less bleak at Everton where workers are convinced that the government is forcing the closure of Bermine so as to give effect to its preferred option of merging Aroaima Bauxite Company (ABC) with Bermine. ABC reverted to state ownership following the withdrawal of Alcoa as the government's joint venture partner in the company.
What lent additional credence to the workers' conviction, said union officials, was the sale of chemical grade bauxite by ABC at a price US$5 a tonne below that of Bermine in a market where the lower price did not significantly add to the size of the market but did effectively reduce the revenue of the industry.
Stabroek News understands too that Viceroy Shipping has been appointed ABC's sole agent for the sale of metal grade bauxite in the US.
This newspaper on Friday contacted Ron Webster, Chairman of Bermine's parent company Bidco, who said that a committee had been reviewing the situation and would be prepared to comment when he had its report by mid-week. Stabroek News understands that Webster together with Bermine's Chief Executive Officer John Lewis and Bidco's Julian Archer, met with Prime Minister Hinds on Friday.
The situation at Bermine, this newspaper understands, was precipitated by the cancellation of a shipment of bauxite last month which was part of a contracted sale to Alcoa. The latter firm was on-selling it to Rual, a Russian company in a back-to-back arrangement. The cancellation resulted in the loss of US$540,000 and could result in a further US$2 million loss of the revenue if the remaining shipments are cancelled, and the need to send home 50 per cent of the workforce.
The cancellation is reported to be the consequence of the exclusive right to the use of the loading basin and mooring facilities that was granted to Viceroy Shipping, a US company, one of the contractors being wooed by government to take equity participation in ABC.
As a result of the exclusive use granted it, the US based company now insists that only its ships can use the Berbice River facilities. Viceroy's exercise of this right has so far resulted in Alcoa exercising a force majeure provision of its contract with Bermine to cancel last month's shipment of bauxite and put at risk the supply contract for the rest of the year.
Prime Minister Hinds contacted by Stabroek News on Friday about the issue explained that it was a question for ABC/Viceroy, but that he believed that access would be dependent on availability, and arrangements for untoward events.
He said that the world supply of bauxite now exceeded demand, and with the removal of the transshipment ship signalled since last year, both ABC and Bermine faced higher shipping costs. The transshipment ship is scheduled to depart by the middle of next week.
However, sources told this newspaper that the cancellation had been triggered by Viceroy's tardy response indicating the availability of the facilities to a ship nominated by Alcoa to lift the cargo between April 20 and 30.
This paper further understands that the arrangements for the ship were cancelled while the engineers at the loading basin were still reviewing the question of availability. The cancellation was as a result of the ship no longer being available to uplift the cargo. This resulted in Alcoa claiming force majeure to cancel the shipment.
Last week, sources told Stabroek News that the board of Bidco, of which Bermine is a subsidiary, requested that President Bharrat Jagdeo convene a small committee of representatives of the Ministry of Finance, the Prime Minister's Office, Bidco, ABC and Bermine to discuss the company's continued operations and reactivation of right of access by a third party to the loading basin. Bidco wants the committee to meet and report by mid-May.
An earlier request was made to Prime Minister Hinds to intercede with Viceroy to relax the exercise of its exclusive right to the use of the loading basin.
The Bidco request for the committee to be set up was made in the wake of an indication by Bermine that its operations would be wound up if the third party access issue could not be resolved promptly. Despite the urgency indicated when it made its request to the President, the Bidco board is yet to receive a response.
Other immediate consequences flowing from the cancellation of last month's shipment are the non-payment of loans totalling US$200,000 to the Finance Ministry, NBIC and the Royal Bank, and non-payment to contractors totalling US$146,000. There are security and transportation invoices outstanding, totalling US$20,000 and operating expenses of US$60,000 to be met.
The consequences of the cancellation of the rest of shipments will be a 60 per cent decline in the volume of Bermine's sales, a loss of US$3 million in revenue, the non-payment of US$1,080 in loan and lease payments and a US$1 million shortfall in working capital that together with contracted debt payments would necessitate a further US$2 million subvention from the treasury.
Other activities that would be put at risk if the remainder of the shipments were cancelled include access to US$300,000 for rehabilitating the company's calciner; the acquisition of two 769 trucks as a result of the contract being assigned to a US bank to guarantee the lease purchase arrangements; and payments for the purchase of three barges - payment for which was guaranteed by Eddie Vieira - as well as access to credit facilities for securing spares and other operating supplies and equipment.
Access to the facilities in the loading basin has been an unresolved issue since 1996 when it was established as a result of Bermine's claim that ABC/Viceroy had altered the agreement made with Bidco by demanding that a user fee be paid on the total amount of cargo uplifted both at the loading basin and at Everton instead of just on that portion uplifted at the former location.